2017 FNMA Bankruptcy Guidelines

This BLOG OnĀ 2017 FNMA Bankruptcy Guidelines Was Written By Gustan Cho

2017 FNMA Bankruptcy Guidelines are the rules and regulations that set the qualification requirements and standards for borrowers of Conventional Loans after a Chapter 7 Bankruptcy discharge date. Fannie Mae and Freddie Mac are the two mortgage giants in the United States that sets the rules for Conventional Loans. Many borrowers ask if both Fannie Mae and Freddie Mac are not government agencies why do banks and mortgage lenders need to conform with their guidelines? The reason that Conventional Loans are called conforming loans is because in order for Fannie or Freddie to purchase funded loans by banks and mortgage lenders, they need to conform to Fannie Mae/Freddie Mac standards. If the loans do not conform to Fannie Mae or Freddie Mac, neither agency will be buying their loans. Lenders do not want to hold the loans in their portfolio. Lenders originate and fund mortgage loans. Here is how the mortgage process works with lenders:

  • Lenders have a warehouse line of credit which is like a large credit line which is used to fund loans to borrowers
  • Lenders use their warehouse lines of credit to fund loans
  • Once lenders fund loans, their warehouse lines of credit gets used up and need to pay off the lines of credit in order to have available credit so they can fund more loans
  • The way they clear their lines of credit is by packaging the loans they have funded and re-sell them to Fannie Mae or Freddie Mac
  • Fannie Mae and/or Freddie Mac will purchase these loans by lender but every loan they buy needs to meet and conform to Fannie Mae and/or Freddie Mac Standards
  • Fannie Mae and Freddie Mac will set standards

What Are Fannie Mac Standards?

As mentioned earlier, mortgage lenders do not want to hold mortgages in their books. They want to resell them to Fannie Mae or Freddie Mac. On this BLOG we will use Fannie Mae. Both Fannie Mae and Freddie Mac have similar standards and both of these two mortgage giants are the Government Sponsored Agencies, GSA, that sets Conventional Lending Guidelines and buy Conventional Loans by private lenders. Here are the basic Fannie Mac Standards:

  • Minimum Credit Scores of 620 FICO
  • Debt to income ratio not to exceed 45% DTI for Fannie Mae and debt to income ratio not to exceed 50% DTI for Freddie Mac
  • Maximum Conventional Loans Limits is capped at $417,000 in most parts of the country unless the property is located in a high cost county
  • Need to abide by Fannie Mae Guidelines with regards to credit, DTI, and adverse items
  • FNMA Requires a seven year waiting to qualify for a Conventional Loan after the recorded date of the foreclosure
  • FNMA Requires a four year waiting period to qualify for a Conventional Loan after the recorded date of a deed in lieu of foreclosure
  • FNMA Requires a four year waiting period to qualify for a Conventional Loan after the short sale date of a short sale

Borrowers can qualify for Conventional Loans after bankruptcy, deed in lieu, foreclosure, and foreclosure. However, FHA Loans have much more lenient credit standards than Fannie Mae does.

What Are FNMA Bankruptcy Guidelines For 2017?

Home buyers can qualify for Conventional Loans after a bankruptcy as long as you have met the mandatory FNMA Bankruptcy Guidelines. 2017 FNMA Bankruptcy Guidelines for 2017 state the following:

  • Home buyers can qualify for a Conventional Loan four years after a Chapter 7 Bankruptcy discharged date
  • Home buyers can qualify for a Conventional Loan two years after a Chapter 13 Bankruptcy discharge date
  • If a person had a mortgage part of their Chapter 7 Bankruptcy and that mortgage has been discharged in the Chapter 7 Bankruptcy discharge and the deed has been transferred out of the name of the mortgage note holder, FNMA Bankruptcy Guidelines state that there is a four year waiting period to qualify for a conventional loan from the discharged date of the Chapter 7 Bankruptcy discharged date. The deed to the property can be recorded at a later date and that does not matter. In order for this to work, the deed needs to be out of the name of the mortgage note holder.

FNMA Bankruptcy Guidelines On Late Payments After Bankruptcy

When you are applying for a mortgage, mortgage lenders do not want to see any late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short short sale. Late payments after bankruptcy and foreclosure is the kiss of death. However, one or two late payments after a bankruptcy or foreclosure may not be a deal killer but it is considered extremely negative by all mortgage lenders and the Automated Underwriting System will pick this up. If you have late payments after bankruptcy and need to qualify for a mortgage loan, contact Gustan Cho at 262-716-8151 or email us at gcho@gustancho.com and I may have some solutions for you.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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